How to Monetize Your Customer Base With Neobanking as a Service
The business model is the first thing to consider when monetizing your neobank. Most neobanks use a freemium business model where customers can use the service for free with some restrictions and elect to pay a membership fee for more features.
This model is mainly focused on customer acquisition and can be expanded into other directions with the help of innovative features that neobanking-as-a-service may provide. But before that, let’s explore alternative business models.
Different Neobank and Fintech Business Models
Fintech business models can be quite creative. From running a white-label digital banking business model to alternative credit scoring, different fee structures, and unbundling, all of these practices can also be implemented in neobanks.
Subscription Based
The subscription-based model has emerged as a popular and innovative service payment method. Most of us have grown accustomed to using a subscription-based payment method to access video and music streaming services like HBO Go, Spotify, Netflix, and Amazon Prime.
Believe it or not, traditional brick-and-mortar banks operate the same way. Each month you will receive a monthly maintenance fee, practically the same as a monthly subscription. The average monthly maintenance fee of retail banks regarding checking accounts has been estimated to be around $13. While most neobanks don’t charge any maintenance fees.
Freemium & Premium
Take Revolut, one of the leaders in subscription-based banking, as an example. Users receive a free current account and a free eurozone IBAN account, and there are no fees for currency trading in 24 different currencies while using their freemium business model.
Suppose a client decides to upgrade their plan. In that case, they will sign up for a premium monthly subscription, which comes with instant access to cryptocurrency, insurance, cashback, free international medical insurance, access to lounge access in airports, higher thresholds for no additional charge, and priority support.
Alternative Credit Scoring Model
Self-employed people usually struggle to get financing from a regular loan provider. This trend has been somewhat worsened by the new economy and the growing acceptance of entrepreneurship.
Fintech businesses are more correctly determining an applicant’s creditworthiness by combining social signal data with AI algorithms rather than relying just on conventional credit scores. This allows a fintech or a neobank to issue loans while mitigating risk with the help of technology instead of relying on the traditional credit score system.
Monetizing Means Giving Customers What They Are Willing to Pay For
This is a great example of a failed monetization attempt because the white-label digital bank offered a premium subscription plan that didn’t satisfy customers.
Five months after the launch of the premium program, the digital banking platform Monzo has stopped accepting new users for its fee-based bundled accounts and is reimbursing a portion of those who subscribed.
The app-based bank acknowledged that Monzo Plus “isn’t the greatest it could be” and that things didn’t go as planned after receiving negative feedback from clients. As a consequence, they might forget about Monzo Plus entirely. The initial plan of the premium offering used a key selling point of informing people that they would save money with the plan; apparently, this wasn’t the most effective way to do it, and fewer than the estimated number of customers signed up.
How Can Neobank-as-a-Service Software Help?
One of the best ways to acquire clients and keep them engaged and happy with the service is to have features that they want to surpass their expectations. Developing these features takes a long time, and by the time you develop a few, the competition is already ahead once more.
There is a simple solution to that, neobank-as-a-service solutions offer a bundle of innovative features that any competitive neobank should have to keep clients happy.
Depending on the generations of customers you serve and the niches, they might be interested in different features. For example, millennials and Gen Z’ers are interested in trading cryptocurrencies and NFTs and getting better financial education without much effort, while baby boomers prefer personal contact and cherish attention to detail.
What features might clients be interested in:
- Gift Cards. Give customers the option to purchase a huge variety of gift cards for their relatives and family
- Payday advance. Pay end users with direct debit capabilities two days before their officially scheduled payday.
- Stock and precious metal investing. Facilitating user investment in equities and precious metals exchanges. This has become one of the reasons so many people use Revolut across Europe; it eliminates the need for another provider and combines everything in one place.
- Travel and health insurance. Give users a simple and practical approach to getting the greatest health and travel insurance policies.
- Vaults / Piggy bank. Give users a means to automatically “round up” their payment with a debit card rounded up to the closest dollar amount, then add the “rounded-up” sum to a Savings account with a piggy bank that pays % interest
- Overdraft and credit card. Give your clients the option to establish a credit history and a credit card.
- Microloans. Support your clients by making it simple for them to get immediate microloans if they require more cash.
- Order now, pay later. Give customers a simple option to order products and services now and repay them over time.
- Boost their purchasing power. Sell virtual gift cards and coupons that let clients save a lot of money on thousands of products and services.
- Customized features. With the help of a neobank-as-a-service, you can bring your own feature to life with the help of our world-class internal research and development team.
- Cashbacks. Give users cashback points for each transaction they make with their wallet or card.
All of this is available for you to acquire and implement in your neobank. Moreover, there are many other features that provide a seamless user experience and greatly lower churn rates, such as passwordless authentication, biometrics, automated 5-minute KYC onboarding, and hundreds of payment methods.
Can a Neobank-as-a-service Provide a Better Business Model?
Did you know that despite various funding cycles, many neobanks are yet to reach profitability? In fact, most neobanks earn much less than $30 in revenue per customer per annum. While this is the case with most neobanks, Optherium has found a way to optimize earnings without scaring off customers. The innovative business model that Optherium provides neobank clients boasts a yearly revenue of over $50 per user.
One of the key ingredients in determining how to charge your customers without losing them is research. What are the main reasons people all across Europe use Revolut? It’s free to make P2P transfers, and guess what, it’s also free to pay via POS.
But most of them also use the marketplace, where you have 3 free trades, and after that, you are getting charged. So basically, know what is the core of your product, and let people use it for free, but also keep in mind that other features should be limited in the sense that your users can still utilize them at any point without having to upgrade or sign up for anything. This makes it very easy for the customer just to click one button and get the feature while also being charged. This is what some of the most successful white-label digital banks do.
Neobank-as-a-Service Will Save You Cost
Not only can you improve your business model, but if you haven’t started yet, choosing an A-to-Z turnkey neobank solution would save your business a lot of effort and resources. A complete, fully managed solution like Optherium entails innovative features, automated onboarding, regulation, payment gateways, and customs APIs in both android and iOS, and you can start strategizing instead of figuring out what to develop first and what to leave behind.
No Development Time
Development takes time and resources, regulatory requirements are hard to pass, and building a referral program is also not easy. All of this comes in the package, including client nurturing features like multi-step reward systems and registration bonuses.
Access Marketing and Advertising Tools
In the neobank complete solution, there are marketing and advertising tools like implementing social stories into your application and dishing out push notifications to your users to nudge them in the right direction toward engagement and certain actions.
With over 12 revenue streams to choose from, including ACH and card issuing fees, interchange fees, direct deposit, monthly maintenance fees, check capturing, ATM, Foreign exchange, International money transfers, marketplace access, advertisement, multi plans, and loading fees, you can set up the right business model however you like.
Final Word
There are many business models a neobank can adopt after the phase of rapid customer acquisition. It is important to start at the beginning with a transparent business model that would attract clients easily.
Later on, you can adopt half of the abovementioned revenue streams and turn the revenue button on.
